Non-bank financing provides an important funding source for the economy and is a valuable alternative to traditional banking. It helps enhance the efficiency and resiliency of the financial system while giving customers more choices for their financial services. Unlike banking, it is not prudentially regulated.
Senior Deputy Governor Carolyn A. Wilkins discusses how high leverage is both a headwind to global growth and a vulnerability in the global financial system.
Based on empirical evidence, I propose a dynamic stochastic general equilibrium model with two financial sectors to analyze the role of corporate debt composition (bank versus bond financing) in the transmission of economic shocks.